President Donald Trump declared April 2, 2025, “Liberation Day,” and announced a new policy of imposing a minimum 10% tariff on US imports. This policy imposes higher tariffs on dozens of countries, and is seen as an attempt to restructure trade relations with major trading partners such as China, the European Union (EU), Canada, and Mexico. However, there is a heated debate over whether this tariff policy is sustainable. Below, we analyze the economic, political, and international challenges facing the Trump administration’s tariff policy and its sustainability.
1. Economic Impact
GDP Decrease and Stagflation Risk
The Trump administration’s tariffs are expected to reduce US GDP by about 0.7%, and by 0.8% in the long term. This could lead to higher consumer prices and higher corporate costs, potentially leading to stagflation (a phenomenon in which economic recession and inflation occur simultaneously). In particular, the decline in consumer spending could weaken the main driver of US economic growth.
Increased burden on consumers and businesses
Tariffs are ultimately passed on to importers and consumers, which leads to higher prices. According to UBS analysis, tariff rates could rise to as much as 30%, the highest since 1872. This increase in costs could lead to a decrease in consumer purchasing power and lower corporate productivity.
Stock market and global economic impact
Major stock markets have plunged since the announcement of the tariffs, and the global economy has also been negatively affected. In particular, there have been large losses in Asian and European markets, which is amplifying uncertainty across global trade.
2. Political sustainability
Internal opposition and political pressure
Concerns are also being raised about tariff policies within the Republican Party. Some lawmakers have warned that a recession caused by tariffs could be detrimental to the Republican Party in the upcoming midterm elections. In addition, corporate lobbying and consumer backlash could also hinder the continuation of the policy.
Possible legal challenge
The Trump administration's tariff imposition method has sparked controversy over its legal basis. Some experts point out that the "reciprocal tariff" formula is overly simplistic and may violate international trade norms.
3. International Reaction
Retaliatory Measures and Deepening Trade War
China and the EU have already announced retaliatory tariffs, deepening the global trade war. Such retaliatory measures threaten to weaken the competitiveness of US exports and undermine the stability of the global supply chain.
Possibility of Negotiation
Meanwhile, some countries, including Vietnam, are moving to ease tariffs through new negotiations with the US. This suggests that the Trump administration is leaving room for policy adjustments.
'Trump's Tariff Policy is unlikely to Continue'
In the past two days, the US market capitalization has evaporated by about 4000 trillion, causing serious damage to US companies, the middle class, and investors. The Trump administration's tariff policy aims to revitalize US manufacturing in the short term, but in the long term, the sustainability of the current tariffs seems low due to increased economic costs, political pressure, and international conflicts. In particular, the risk of stagflation and the instability of the global trade order will be major obstacles to maintaining the policy. Therefore, more detailed coordination and international cooperation will be needed to ensure that these policies continue to be maintained.